High Court Punts On California Medicaid Ruling

A key legal case challenging cuts in Medicaid pay for doctors, hospitals and pharmacists is heading back to California.

Keith J. R. BinnsiStockphoto.com

The Supreme Court has officially declined to decide one of its bigger cases of the term: whether or not doctors, hospitals and other health care providers can sue a state to challenge cuts in the Medicaid health program for the poor.

Instead, a five-justice majority, led by Justice Stephen Breyer, sent the case back to California's Ninth Circuit to decide if "changed circumstances" warrant a different process – and, perhaps even a different defendant — that would sidestep the constitutional issue entirely.

At issue are a series of cuts to Medicaid providers passed by the California legislature in 2008 and 2009. Hospitals, doctors, pharmacists and others sued to block the cuts.

But they faced a troubling obstacle: The Medicaid statute itself includes no "private right of action" that explicitly allows individuals to sue states to ensure adequate reimbursement.

So they sued using the "Supremacy Clause" of the U.S. Constitution. Basically, the plaintiffs argued that the state's cuts should be trumped by the federal Medicaid law's requirement that Medicaid payments be "consistent with efficiency, economy and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such are and services are available to the general population in the geographic area."

The Ninth Circuit basically accepted that reasoning and blocked the cuts. At first, the federal Centers for Medicare and Medicaid Services agreed that California's proposed reductions were not consistent with the federal statute. But last October, after the Supreme Court heard oral arguments in the case, the federal agency reversed itself, at least in part, and said it would allow many of the cuts to go through.

That didn't make the case moot, but it changed things considerably, Breyer wrote in the majority opinion.

For example, he wrote, rather than suing the state, "it may require respondents now to proceed by seeking review of the (federal Medicaid) agency determination under the Administrative Procedure Act."

In other words, the health care providers' beef is no longer with the state, but with the feds.

And the advantage of that, as far as the Supreme Court is concerned? Unlike the Medicaid statute, the Administrative Procedure Act "provides for judicial review of any final agency action." So if the providers don't get satisfaction, they can sue without making a constitutional case out of it.

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